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March 22, 2013

Peter Schiff: The Dollar’s Collapse Is (Still) Coming

He may have been early in his prediction, but it will happen, famed money manager says

The last two may be a stretch, but the outspoken head of Euro Pacific Precious Metals has warned of the dire consequences of Fed action for what seems like forever (or at least since the first round of quantitative easing). Those consequences have yet to reveal themselves.

Federal Reserve Chairman Ben Bernanke said Wednesday that he didn't believe the Fed was fueling a stock market bubble with its accommodative policies.

Schiff told The Daily Ticker on Friday that the Fed couldn’t see a bubble if it popped in its face.

“In fact, Ben Bernanke himself said there was no real estate bubble even after the real estate bubble burst,” Schiff told the website. "I don’t think there’s necessarily a bubble in the stock market. There’s certainly a bubble in certain types of stocks that are way overvalued as a result of all the cheap money Ben Bernanke has been creating."

That doesn't mean the Fed's unprecedented policies of near-zero interest rates and bond buying are without consequence.

"What he is doing with his reckless monetary policy is causing our resources to be malinvested," Schiff continues. "We’re spending too much on housing right now because of what Ben Bernanke is doing. He's bragging about the fact that we’re building more houses and home prices are up, but they’re only up because of the artificially manipulated prices thanks to the Fed, and all of this is a mistake and is going to be unwound in a very painful way."

The ticker notes Schiff’s own role in detecting bubbles, specifically the real estate bubble ahead of 2007 and 2008. In a now famous appearance on The Daily Show With Jon Stewart, Stewart produced earlier video clips of Schiff predicting the crisis of 2008 to the scoffs and dismissive giggles of pundits at Fox, CNBC and others.

He’s likewise been warning of the dollar’s collapse as a result of Fed policies.

Yet, as the website notes, since the beginning of the year the dollar, measured against a basket of other currencies, has been rising.

"At some point that is going to change," Schiff says. “People are going to realize or call the Fed's bluff, that our economy is stimulus-based. There is not a real exit strategy. The Fed is going to print money indefinitely."

He adds, "the dollar is weak, it's just that other currencies are also weak, so that's masking how truly weak the dollar is. The only way you can say dollar bears have gotten it wrong maybe is on the timing," Schiff concedes. "I've been talking about a weak dollar—the dollar has been weak, and look at how weak the dollar has been against gold."